Electric utilities in Michigan might soon be offered a new batch of financial incentives if they meet benchmarks designed to boost reliability, restrain rates, and meet the state's renewable energy goals.
Or, they'd be financially penalized for not meeting those benchmarks.
The Michigan Public Service Commission is taking comments on the second phase of a new strategy that could meet state energy goals faster. The so-called "straw proposal" is the first step in developing the strategy.
Straw proposal (from strawman proposal) is a term for a brainstormed draft proposal intended to spark conversation and to be torn apart, to tease out its disadvantages and generate new and better proposals.
Last year, the focus of this process was on specific benchmarks for transmission and grid improvements that could boost reliability. The result was a mechanism for the state's two largest utilities, Consumers Energy and DTE Energy, to qualify for up to $10 million in incentives or penalties for meeting or failing to meet reliability benchmarks.
This time around, the MPSC is asking for input on specific benchmarks for utilities to use electricity more efficiently.
For example, utilities make a lot of money building new power plants but that raises rates and increases pollution. Instead utilities could be offered a financial incentive to tap into and aggregate locally stored sources of electricity from smart home thermostats, electric vehicles, and rooftop solar panels.
The technology is known as a Virtual Power Plant, because such small sources of stored electricity, tapped in large enough numbers, can potentially put as much electricity on the grid as a traditional fossil fueled power plant or wind or solar farm.
The Michigan Public Service Commission has separately warned regulated utilities that not including VPPs in its future plans could risk penalties.
Experts in environmental groups have been weighing in, generally favorably, on the straw proposal's carrot-and-stick approach.
"We think these types of solutions are exciting because they hit on all those pieces — affordability, clean energy, and reliability," said Katie Duckworth, a staff attorney with the Environmental Law and Policy Center. "They can benefit the utilities and the grid in all of those ways."
